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Apr 17, 2008 -- HELOCs being yanked with no warning

There's a new trend that you need to know about if you have a home equity line of credit. Buried in your HELOC is a clause that allows the bank to freeze or reduce your line, at will, with almost no notice. In his TV work, Clark recently did a story about Bank of America doing this to its HELOC holders. But many banks other than just BoA are doing this.

This is a double whammy because many banks charged fees upfront to set up the HELOCs. So far they're not refunding the junk fees. Meanwhile, your credit score can also be demolished based on utilization of the HELOC. Say you have a HELOC with a $100K limit and you're only using $30K. That means you're using 30% of the limit, which is a relatively low level. But if your HELOC is suddenly dropped to a $30K limit, then you're using 100% of what's available to you and your credit is buckling under that strain.

Banks are slashing HELOCs because people are increasingly defaulting on them. Yet people with solid credit can get fantastic offers for borrowing right now because it's such an odd time in our economy. Clark's credit union is offering a 5-year fixed rate HELOC at 3.95%. That's really inexpensive! He also has access to car loans at 3.90% for new or used vehicles on loans of 4 years or less. There's such a stark contrast between what's available to people with good credit and people with bad credit.


Unfortunately, Clark won't be able to answer any questions submitted via commenting. If you have a question, please try posting it to our message boards.

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What others are saying

  • HELOC
    Banks like Regions do the same game. Based on an unexplained appraisal done by somebody who never saw our house RB 'suspended' the HELOC but continued to charge me with an annual fee.
    Question: Which CU does Clark recommend?
  • Citi Abruptly and Summarily Reduces Credit Limit Based on Blanket Appraisal
    Citi imposed a sudden and unannounced reduction in the credit limit on my home equity line of credit source account. My original credit limit was $218,000. The bank summarily and abruptly reduced and froze it at $128,000. I've never been late on a payment. My Citi credit-account balances have always trended downward, historically, and I have a high credit score. By suspending my credit without notice, the bank has deprived me of access to a line of operating credit that I need to live and perform my freelance job. Unfortunately, I've been parking all of my extra cash in this account -- all paychecks and other receivables. I made a large payment/deposit of $17,250 to bring down the balance. This was all of my monthly cash buffer. I used the account to escrow my own property taxes and to save my quarterly income-tax payments. After depositing checks, I also would then use the account to pay my mortgage and HOA dues. All of this cash is now unavailable to me and causes me extreme financial hardship. The bank says it's due to a decline in overall property values in my area. I received no notice of property-value reappraisal. I received no advance notice in writing of any kind. I called the Citi HELOC toll-free number and spoke with a customer service rep on 11/13/2009. I was then transferred to Ben, employee no. 7472657, who informed me of the situation and told me that Citi had the right to reduce my credit limit without notice. He instructed me to write a letter appealing the decision, which I wrote and mailed with delivery confirmation on 11/13/2009. I then went down to my local branch (Pier Ave., Hermosa Beach, Calif.) on the same day and spoke with Manuel (Manny), the loan officer on duty who basically reiterated what the others had already told me, and provided the added detail that the property had been subject to a blanket revalution -- from $500,000 down to $345,000, which I vehemently dispute (the property is in Hermosa Beach). Manny helped me by transferring the remaining eligible cash balance (approx. $630) from the HELOC into my checking account. He then offered to make me a personal loan in the amount of $10,000 at a much higher interest rate. On 11/24/09, I complied with the stipulations outlined in the Citi appeals process -- submitting to a $350 home appraisal by LSI, which valued the property at $415,000, and sending Citi my most current mortgage statement showing the current first-loan balance of $138,000. This puts my loan-to-value ratio at 64%. We'll see what happens next. I'd like to get the credit line restored or, at the very least, to recover my $17,250 so I may continue paying my living expenses.
  • Credit Union Name?
    I don't think Clark would ever give out the name of his bank..come on guys.
  • Home equity line of credit
    B of A just closed our line of credit, we have a small balance and they said due to the falling house prices we could no longer have a line of credit! Will this negatively affect are credit which is outstanding.
  • Bank tryin g to get us to agree to a floor on an existing HELOC that didn't have one.
    Can the bank ask us to fill out new paperwork to implement a floor on our HELOC that did not exist before? What would happed if we don't agree?
  • HELOC: PAID OFF: SHOULD WE CLOSE?
    We have an excellent credit rating. My husband & paid off our HELOC, and the bank has sent a letter asking if we want to close it or keep it open. Closing credit card accounts can have a negative effect on credit rating. Is it the same with HELOC?
  • Clark Howards Credit Union
    What is the name of Mr. Howard's Credit Union?? dm
  • HELOC
    WHAT IS THE NAME OF CLARK'S CREDIT UNION? I HAVE AN HELOC THE MORTGAGE COMPANY JUST REDUCED THE AMOUNT STATING MY HOME VALUE HAD DROPPED $$10K. I HAD MY PROPERTY APPRASIED. THE APPRASIAL IS EXACTLY $10K HIGHER. WHAT RECOURSE DO I HAVE TO HAVE THE MORTGAGE COMPANY REINSTATE THE ORIGINAL AMOUNT? PLEASE ADVISE. THANK YOU, SANDY CARROLL
  • Loans
    Definitely a reflection of the economy as a whole. Not only housing prices drop but the collapse of the credit markets. banks pulling back from loans. Eventually we will ride out this problem, but if you have cash now there are some bargains to be had.

    http://gewdir.comcredit loan blog
  • my heloc was frozen
    What is the name of clarks credit union?
  • What is the name of clarks credit union?
  • Getting a loan
    Where can you get a loan when you credit isn't that good?
  • Line of credit recourse
    Has anyone successfully gotten the "annual fee" waived, returned or pro-rated, since the equity line has been frozen? Can they charge for a service they aren't providing?
  • Credit union
    What is the name of clarks credit union?
  • heloc
    what is the name of clarks credit union.
  • Line of Credit
    Please tell me which credit union Clark is using for his Line of Credit referenced in "Helocs being yanked without warning". My e-mail is knhall@mindspring.com.

    Thanks,

    Kem
  • Line of Credit
    What's the name of Clark's credit union?
  • Heloc vs 2nd mtg
    I'm trying to find the best rate for a Heloc/2nd mtg loan.
  • Line of Credit
    I am tring to get a line of credit for as much as possible for either commercial real estate or residential. i have a 780 credit score and have a house which i owe 249,000. can i get a line of credit for the amnt i owe on the house which is 249k. i paid 275k for it and have owned it for 3 months. What are the names of good banks to go to besides Wachovia? and what's the name of Clark's Credit Union? pls email me at sinnessa01@yahoo.com
  • Bad credit equity loan
    I have very bad credit because of medical bills piling up while I lost my job of 27 yrs I am of course working I'm very reliable but cant get caught up without debt consolidation. I have a home thats completely paid off but cant get a loan because too many past dues. I have rental property in disrepair I need to update and sell, homes in that area sell between $300-600k fixed up just a little I'm in the $375 to 4k range and owe just $150k my primary is paid off and I have right at $15k in small debt period and I cant seem to get an equity loan because of poor credit scores. Only a house flipper will purchase my property the way it is- Is there any help for someone like me without paying 5000% interest to the sharks??
  • line of credit
    I am tring to get a line of credit for as much as possible for either commercial real estate or residential. i have a 780 credit score and have a house which i owe 249,000. can i get a line of credit for the amnt i owe on the house which is 249k. i paid 275k for it and have owned it for 3 months
  • Heloc
    Hi,
    I have a good faith stimate (fixed rate first mortgage at 6 percent and a floating HELOC prime + 1 percent).
    I've a excellent credit(810).
    I wonder if I can get heloc at lower interest for myself for my second mortgage.
    Any suggestions??
    My loan is a 80/15/5
    Do you guys think that I can get 80 percent from countrywide 5 percent downpayment and the other 15 percent from Clark's credit union is offering a 5-year fixed rate HELOC at 3.95%.
    Please I need help.
    Any suggestion or information about heloc loan will help.
    Thank you,
    Eduardo
  • heloc frozen
    I had money earmarked for a vacation to go see my daughter last week, I had paid my bills for the month out of my checking and was going to withdraw vacation money from my helo. I had my statement dated 3 days before showing my available credit, What a shock to go to the teller and find that I had nothing. this was on may 15, a week later i received a letter dated may 15 telling me my account was frozen due to home values dropping, I still have $100,000. equity in my house. I too paid on time, and will elave BANK ATLANTIC as soon as I can. If you have anything in a heloc grab it fast.
  • HELOC-Chase
    We got the same sort of letter from Chase slashing our line of credit from $108,000 to $48,000 because our homes value had "supposedly" dropped from 290,000 to 270,000. But in ADDITION to that they also changed my loan to value ration from 100% to 85%. All this and I have never been late on a payment, and didnt even have an outstanding balance with them at the time! Why should I be penalized because THEIR loan officers made risky loans or borrowers overextended themselves? I have kept my end of the deal. I'll drop Chase like a hot potato as soon as I get the chance!
  • HELOC BOA
    In March, BOA closed my HELOC on my primary home. Same explanation, they said the value of my hme dropped by 15% in nice area of Atlanta between 2007 and 2008. I fought them, and they still said no. Today, they shut down my HELOC of my florida property. I JUST refinanced with them in APRIL and now, 5 weeks later, they said that the value dropped by 16% or 40K. As soon as this credit crunch is over, I will refi everything and fire them and dump their checking account that I have with them. Never late, alwasy paid more than the minimum, 785 credit rating, and this is how they treat their customers??? Now my Credit rating will be zapped down to the low 700's or upper 600's if i am LUCKY.
  • HELOC-National City...
    Ditto. I have Excellent Credit and plenty of Equity in my home (good LTV ratios) and still they froze my HELOC as well. I called them up and got an explanation that did not make any sense and then was referred to the special mort. clause. I'll refi ASAP to get far away from National City.
  • credit union HELOC
    Which credit uion does Clark belong to? I would like to show this offer to my wife's bank BB&T and my credit union Delta C.U...
  • Citibank cut our HELOC with NO warning this week
    We have a HELOC through Citibank, and just received a letter on April 18th saying that, as of April 15th, our credit line was being reduced 50% because our home's value has decreased. Considering the fact that our home was just purchased last year and is in one of the most sought after areas in Suwanee, GA, I knew this to be a line of bull. The letter instructed me to call if I wanted Citibank to reconsider, so I called first thing this morning and was told that, in order for Citibank to reexamine the situation, we would have to pay for a new appraisal on our home. We just got one last year, but apparently that's not good enough for Citibank. To add insult to injury, we just had brand new windows installed in our house, and when the vendor went to cash the check, Citibank bounced it because it pushed our loan amount higher than the new, reduced amount that Citibank has decided to give us. We had NO notice of the reduction and the check was written four days prior to the date that Citibank reduced our line of credit. So not only did the reduction hurt us, but it also hurt the vendor, who is a personal friend, because he deposited the check assuming that it would pass with no problem (BECAUSE IT SHOULD HAVE!) and paid some of his own bills with the money.

    I will never do any business with Citibank again, and I am canceling the credit card that I have had with them for over 12 years as well. Hopefully our local bank will be able to give us a new HELOC so that we can transfer the Citibank balance to it because I want to cut ties as soon as humanly possible with them. Like other posters, we have excellent credit and have always paid more than the minimum balance on anything we've owed. Now, thanks to Citibank, our credit rating will drop significantly.
  • Credit Union
    what is the name of Clark's credit union?
  • HELOC
    Bank Atlantic just did this to me last month. I searched by documents and sure enough, the clause was in there. I have never been late and have excellent credit. Very disappointed that they would do this without any reason from me. I plan to pay this thing off asap and never do business with them again. So what happens when everyone gets tired of dealing with banks and their crazy whims of charging fees for everything to this...I think they have forgotten that CUSTOMERS are their reason for being.
  • credit union
    What is the name of Clark's credit union?
  • cutting off my 2nd with no warning
    Countrywide did this to us in Jan.of this year. I have always paid on time or early and have excellent credit. I called and asked why and they said prices had fallen in my area and unless I can send proof that my house is worth more they wont unfreeze my line of credit.When I asked how much they thought my house was worth they would not give me a answer. I had a local realator broker do a analisis and sent it off to them and only got a phone call rejecting her 30 years of experience and documentation.They said I would get a written responce when I spoke to them by phone but it never came. They did have the gal to ask me to refinace both my first and 2nd with them!I have never been treated like this in all my life. I own my own business and I used that HELOC to keep things going in these uncertain times. Now Im scrambleing to figure out how to raise capital to keep everything going.
  • what is your credit union?
    what is the name of clark's creditunion name?
  • What is Clark's Credit Union name
    My credit union rates are no where close to clark's credit union bank. What Credit union bank does Clark uses
  • What is the name of your Credit Union?
    What is the name of your Credit Union?
  • heloc
    we have an adjustable.Prime is 6% what should we do.were at 5.45% now.They said its based on prime.
  • Bottom rate
    Also be sure that as the Prime drops, your HELOC rate is dropping if its variable. I got a HELOC at Prime MINUS 1.5 and my bank tried to set a floor at 6%. I challenged it and won and now my HELOC is down to 3.75%.
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